24 Sep Passing off of trade name
A business which has been in the industry for many years trading under a same trade name will most often acquire goodwill and reputation in the eyes of its customers. The brand and/or trademark carried under the said business will often be one of the most important deciding factors of customers as they will equate it to elements such as quality, great customer services and etc.
Such goodwill and reputation yield over the years prove to be a valuable asset to the company and there is a common law without statutory basis to govern this aspect of the business which is known as – PASSING OFF.
In layman’s term, it is when a trader attempts to take advantage of the business’s reputation of another trader by imitating a get up of a brand and/or using identical and/or confusingly similar trade names to cause the unsuspecting public to mistake it for the original owner’s products/services. Such unscrupulous action may lead to several factors including but not limited to a tarnished image, loss of sales and the worst case scenario is the winding up of a company, if such unethical practices are being continuously ignored.
Many of us are unaware that the trade name of a particular business could be passed off on another trade name which is confusingly similar. Such passing off action is not widely known because it is most often being used in the trademark’s capacity instead.
In regards to the above, this will bring us to the difference between a trademark and trade name before our further explanation on passing off of trade names below. Trade names are those which are being registered with Suruhanjaya Syarikat Malaysia (SSM) and it does not automatically grant you any infringement/common law rights should another business use it as their trademark unless the particular business has registered that said trade name as its trademark at the Intellectual Property Corporation of Malaysia (MyIPO) or the said trade name has actually acquired substantial reputation and goodwill as discussed above.
If a business has over the years accumulated the goodwill in its trade name without registering it as its trademark and the said business is able to prove the criteria which we will be discussing below, then YES, the business is claimed to be able to successfully pass off another business’s trade name.
The remedy of a passing off action will normally include injunction whereby the new company will have to stop from using its name and in some cases the complainant is able to claim damages if he is able to proof infringement.
In a country like the United Kingdom, there is an alternative to avoid such a passing off. If the established business is registered under the United Kingdom list of companies, the said company is able to persuade the Companies House to exercise its rights to command the new infringing company to change its name under the CA 2006, sec67.
The criteria for a successful passing off action will be determined as such:
- The complainant is established under that name and/or it possess other rights to use it.
- The new company is engaged in a business with mala fide intention to override on the goodwill and reputation of the complainant’s company.
- There is a likelihood of the new company causing damages. Unless the complainant’s company is considered to be a well-known company, normally the tort of passing off is available between two businesses of similar nature or within an overlapping geographical area.
The complainant need to be able to prove all the above to make the passing off action case a success.
Several precedent cases have proven that the action of passing off using trade names is possible. One of the precedent cases is the Mun Loong Co Sdn Bhd v Chai Tuck Kin  1 CLJ 86 case whereby the defendant used an identical name of “MUN LOONG” as that of the plaintiff. The plaintiff had sued the defendant under the tort of passing off, restricting the defendant from using the name on similar goods of the plaintiff. The Court later on went to grant the plaintiff an injunction against the defendant as the Court believes that the defendant’s business is calculated to deceive either by diverting customers from the plaintiff to the defendant or by occasionally causing confusion between the two businesses.
Passing off is at times considered to be a hassle to some businesses due to the fact that they will have to satisfy certain criteria to be successful. Therefore it is highly advisable for businesses that possess the intentions to use its trade name as their brand or marketing tool to register their name / mark with MyIPO. Such action will save us from the hassle and allow businesses to be better protected under the Trade Marks Act 1976.